Land and Agricultural Development Bank of South Africa v Phato Farms (Pty) Ltd and Others

• Jurisdiction: South Africa
• Court: Gauteng Division, Pretoria
• Judge: Molopa-Sethosa J
• Judgment Date: 13 August 2014
• Citation: 2015 (3) SA 100 (GP)
• Hearing Date: 13 August 2014
• Docket Number: 58018/10
• Counsel: Details of counsel not supplied.

Molopa-Sethosa J:

[1] On 1 November 2013 I made the following order: D

'1.

The defendants' special pleas, both on prescription and premature claim, are upheld.

2.

The plaintiff is ordered to pay the defendants' costs.'

[2] I undertook to furnish reasons for the order at a later stage. The following are the reasons.

[3] The plaintiff in this matter instituted an action against the E first defendant for payment of R3 372 119,82 based on a short-term loan agreement (the loan agreement) signed in September 2003, secured by a general notarial bond (the general notarial bond) registered over the movables of the first defendant on 13 October 2003; and against the second to fourth defendants as sureties, for R2 460 000.

[4] The defendants raised two special pleas to the plaintiff's claim against F them, that —

•

the plaintiff's claims have prescribed (the prescription plea); and

•

the plaintiff has failed to comply with the provisions of a breach clause contained in the loan agreement, and accordingly the G plaintiff's claim based on the principal debt and on the accessory obligations are premature (the premature claim plea).

[5] The parties agreed to separate the issues and to first deal with the defendants' special pleas set out above, and these were by agreement referred to this court for decision.

Background H

[6] During or about October or November 2010 the plaintiff served a simple summons on the defendants in terms of which the plaintiff sought —

•

payment of the sum of R3 372 119,82 from the first defendant I pursuant to the conclusion of a short-term loan agreement concluded between the plaintiff and the first defendant; and

•

payment of the sum of R2 460 000,00 from the second to fourth defendants, pursuant to the conclusion of suretyship agreements by the second to fourth defendants in favour of the plaintiff. J

Molopa-Sethosa J

A [7] The plaintiff subsequently served a declaration which was later amended. In terms of the amended declaration the plaintiff relies on —

•

the loan agreement concluded between itself and the first defendant;

•

the general notarial covering bond registered over the movables of the first defendant in favour of the plaintiff; and

•

suretyship agreements executed by the second to fourth defendants B in favour of the plaintiff.

[8] The defendants filed a plea and counterclaim to the plaintiff's claim, and raised the two special pleas as set out above.

[9] On 12 April 2013 the plaintiff served the defendants with an adjusted C replication in response to the defendants' special pleas, in terms of which the plaintiff alleges that —

•

the general notarial covering bond is a 'mortgage bond' for the purposes of s 11(a)(i) of the Prescription Act 68 of 1969 (the Prescription Act), and accordingly carries a prescription period of 30 years;

•

D in terms of clause 8 of the notarial bond the plaintiff is entitled to claim for moneys allegedly owed on the principal debt by way of the bond, without having to comply with the notice periods contained in the loan agreement; alternatively

•

the second to fourth defendants are not party to the loan agreement and no notice in terms of the suretyship is required; further alternatively E

•

the second to fourth defendants have waived their rights to notice in the execution of the suretyship agreements.

[10] The issues for determination were thus the following:

F [11] The prescription plea: Is a general notarial covering bond a 'mortgage bond' for the purposes of s 11(a)(i) of the Prescription Act?

[12] The premature claim plea: Insofar as the plaintiff's relief based on the principal debt, ie the loan agreement, is not yet claimable against the first defendant, is the plaintiff entitled to seek relief against the first G defendant on the accessory obligation, being the notarial bond?

[13] In the alternative to the above, if the relief sought against the first defendant on the principal agreement were not yet claimable, would the plaintiff be entitled to seek relief against the second to fourth defendants based on the accessory obligations of suretyship, either by the argument H that the second to fourth defendants were not parties to the loan agreement, or by the argument that they have waived the entitlement to notice?

[14] On prescription, s 11(a)(i) of the Prescription Act provides as follows:

I '11 Periods of prescription of debts

The periods of prescription of debts shall be the following:

(a)

thirty years in respect of —

(i)

any debt secured by mortgage bond; . . . .'

[15] Subsections 11(c) and (d) of the Prescription Act provide as J follows —

Molopa-Sethosa J

'(c)

six years in respect of a debt arising from a bill of exchange or other A negotiable instrument or from a notarial contract, unless a longer period applies in respect of the debt in question in terms of paragraph (a) or (b);

(d)

save where an Act of Parliament provides otherwise, three years in respect of any other debt'.

[16] For purpose of prescription the following facts are common cause B between the parties:

[17] Plaintiff has two causes of action against the defendants based on —

•

the loan agreement; and

•

the general notarial bond.

[18] The full amount in terms of the loan agreement became due and C payable on 1 April 2004.

[19] Summons in this matter was issued on 11 October 2010, as appears from the registrar's stamp. According to both parties the summons was served on the defendants during or about October/November 2010, D more than six (6) years after the cause of action arose. Unfortunately there are no returns of service in the papers filed before this court; however, it is not in dispute that the summons was served more than six years after the cause of action arose.

[20] It is thus common cause between the parties that the plaintiff's E claim against the first defendant, based on the loan agreement, arose more than six years prior to the service of summons on the defendants.

[21] The plaintiff, in replication to the special plea of prescription, as already stated above, pleads that the general notarial covering bond is a 'mortgage bond' for the purposes of s 11(a)(i) of the Prescription Act, and accordingly carries a prescription period of 30 years. F

[22] The defendants contend that the general notarial bond does not constitute a mortgage bond for purposes of s 11(a)(i) of the Prescription Act, and consequently that the plaintiff's claim has prescribed.

[23] Further, that even if the claim had not prescribed as against the first G defendant, it had prescribed against the sureties (this latter contention was abandoned by the defendants during argument).

[24] It is not in dispute that the bond in question herein is a general notarial bond, and not a special notarial bond.

[25] The first question to be answered is whether the words 'mortgage H bond' referred to in s 11(a)(i) of the Prescription Act also includes reference to a general notarial bond. If that were the case, the debts upon which the plaintiff's claim was based would be subject to a period of prescription of 30 years and the plaintiff would then be successful in its claim against the defendants. I

[26] If not, the second question arises, namely whether the defendants' debt to the plaintiff can be said to be 'arising . . . from a notarial contract' as envisaged in s 11(c) of the Prescription Act. In such event the period of prescription would be six years, with the result that the plaintiff's claim against the defendants would have become prescribed. J

Molopa-Sethosa J

A [27] The defendants contend that a general notarial bond does not confer real rights on a creditor, that the conferring of a real right of security on a creditor is an inherent characteristic of the concept of 'mortgage'.

[28] I may just state that for their contentions, the parties, more B especially the defendants, referred the court to several authorities dealt with below.

[29] The authors JG Lubbe & TJ Scott in 17 Lawsa part 2 para 327 define the term 'mortgage' as follows:

'The term mortgage, in the narrow sense of the word, refers to a real C right of security in an immovable asset or immovable assets of another, which is created by registration in the deeds registry pursuant to an agreement between the parties.'

[30] The authors Du Bois et al in Wille's Principles of South African Law 9 ed at 631 define a mortgage as —

D 'a real right, in respect of the immovable property of another, securing a principal obligation between a creditor and a debtor. This real right is created by registration in the Deeds Registry pursuant to an agreement between the parties.'

[31] Lubbe & Scott supra refer to a tendency to use the term 'mortgage E bond' as a synonym for 'mortgage'. This usage, they assert, results from confusion between the right of security and the means employed to create it. The term 'mortgage bond', strictly speaking, refers to the deed or instrument, the registration of which brings about the right of mortgage.

F [32] Section 102 of the Deeds Registries Act 37 of 1947 (the Deeds Act) defines a mortgage bond as 'a bond attested by the registrar specially hypothecating immovable property'.

[33] In Goodricke & Son (Pty) Ltd v Registrar of Deeds, Natal 1974 (1) SA 404 (N) at 408 Muller J stated, with reference to the case of National Bank v Cohen's Trustee 1910 TPD 1305, that '(a) mortgage bond over G immovable property is a real right in land'.

[34] Du Bois et al supra state at 634 that '(t)he agreement to mortgage must be valid and must reveal an intention to grant real security for performance of the principal obligation by creation of real security in a specified immovable asset'; and that '(t)he real right of mortgage is created H on registration of the mortgage...